Ask an Expert: What’s The Deal with Fixed vs. Variable Mortgages?

At Avi Urban, we work with the experts to help you make the best decisions when buying your new townhome or apartment with us. One of these experts is Laura Parsons, Bank of Montreal Manger of Mortgage Specialists and Calgary Sun Columnist.

The change in mortgage interest rates over the past few months has triggered conversations about fixed versus variable interest rate options. To help put things in perspective, our recent 2.99% campaign was the lowest fixed rate in fifty years and this was my first time seeing a fixed rate below prime.

A fixed mortgage is one where the interest rate and monthly payment remains the same for the entire amortization period. A variable mortgage is one where the interest rate changes based on the prime lending rate.

Because the spreads between a fixed rate and a variable rate are currently so minimal, it’s caused many Canadians to rethink their variable rate strategy. Here’s how to choose between a fixed and variable mortgage:

Figure out your long term plans: When deciding what kind of mortgage to choose, you should ask your self what are your long term plans and understand how a fixed mortgage fits in those plans. For many, knowing that their payments will remain the same for the next five to 10 years provides a peace of mind.

Decide if you want to move: If you have a fixed mortgage, you have the option of taking your mortgage with you and blending the rate when you move to a new home. This can be beneficial if rates change.

Get the historical rates: To help you make an informed decision, a mortgage specialist can provide you with historical rates that will put our current rates in perspective. You will see rates have been as high as 21% in the early 1980’s and as low as 2.99% in 2012. It’s also important to remember that choosing a shorter amortization period could save you thousands of dollars.

The decision to go variable or fixed is a personal decision, and you should understand all the pros and cons of whatever you decide. Meet with an expert to discuss your options so you can make a well informed decision.

Questions or comments for Laura? Drop her a line at, or comment below.